Tax rise 'won't hurt North Sea' says OBR

The shock tax raid on North Sea oil and gas producers will have "no
significant effect" on their future investment and production, the head
of the Office for Budget Responsibility said.

Centrica, the owner of British Gas and a significant North Sea producer, has complained that the Budget's 12 percentage point increase in the tax rate on the profits of North Sea producers will stifle investment.Photo: Alamy

Robert Chote, who chairs the independent tax and spending watchdog, said the assumption was built into its forecasts, directly contracting industry complaints that the move will leave fields underdeveloped.

"We're assuming that there's no significant effect on the investment and production profile," Mr Chote told MPs on the Treasury Committee.

Centrica, the owner of British Gas and a significant North Sea producer, has complained that the Budget's 12 percentage point increase in the tax rate on the profits of North Sea producers will stifle investment.

Graham Parker, Mr Chote's colleague at the OBR, said the watchdog had concluded that the move was "very much a profits tax" and that companies would still press ahead with plans, given the high oil price.

However, he admitted: "I certainly think we would have liked more time and to discuss it more widely."